Connecticut deposits $1.5 billion toward state pensions

Connecticut transferred about $1.5 billion in excess budget reserves to its underfunded state employees’ and teachers’ pensions, bringing extra deposits in the funds to more than $10 billion over the last six years, state Treasurer Erick Russell said.

Under a law passed in 2017, Connecticut — which is heavily reliant on Wall Street for income-tax revenue — must stock its rainy-day fund with any capital-gains and bonus taxes that exceed a certain threshold. Once the rainy-day fund reaches 18% of annual spending, any excess is transferred to the pensions. 

The law has helped the state reduce its pension debt and led to credit rating upgrades.

Connecticut had a $35.1 billion unfunded pension liability in fiscal year 2024, down from $40.7 billion in fiscal 2019. The state employee pension was 55.2% funded in 2024, up from 38.2% in 2019. The funding ratio for the teachers’ pension improved to 62.3% from 51% in the same time frame. Updated ratios will be published later this fall, Russell said.

Connecticut also transferred $500 million to the rainy day fund to mitigate any federal cuts to social services, including food stamps and health care. Lawmakers approved the move in a special session last week.

“We are building reserves to help guard against the unpredictability of our federal government and ensure the continuation of essential services for Connecticut families,” Russell said in a Tuesday news release.